Economic Democracy in the Network Century

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* Book: Phyles: Economic Democracy in the Network Century. by David de Ugarte




David de Ugarte:

"This work is the last instalment in a series of books, written by half a dozen authors besides me, that try to describe and understand, from a common logic although from different angles, the vast social changes which took place in the wake of the fall of the Berlin Wall. In the last twenty years, we have seen how the division of the world into two great blocs gave way to globalisation, while the emergence of the Internet produced a deep change in the fundamental structures of power, always dependent on the management and social control of information.

This substantial change converged and merged with a new paradigm of conflict as apparently distributed and ungraspable. This new expression of an emerging world cohering around distributed networks (the web, the blogosphere, SMS networks) became apparent in its civic dimension when, all over the democratic world, waves of cyberthrongs influenced political processes which had apparently been under the full control of the powers that be: from the fall of Estrada in Manila in 2002 to the Athens riots in 2008, through the 2004 13M in Madrid and the 2005 French swarming. This was a distributed paradigm which, on the other hand, could be glimpsed in conflicts since the 90's, and which was given a label with the advent of al-Qaeda: what are known as the post-modern wars.

In less than two decades, the whole world started to inculturate a fundamental change in the shape of the great social network. The idea of belonging was changing. The cohesive, explanatory power of nationality was shrinking. Nations were starting to become both too small and too large to explain who we are. The mass experience of virtual socialisation, de-territorialised but personal, as well as the changes in the economic system leading, in the face of the onslaught of networks and globalisation, to what Juan Urrutia has called the coming capitalism, opened a period characterised by the search for identity, by identitarian experimentation.

We are in the process of going from a world of decentralised networks to a world of distributed networks. This is evidenced in communication as a crisis in the information systems of agencies and newspapers; in the cultural sphere as a crisis in the current industrial model for films, books, and music; in democracy as citizens' cyberthrongs; and in war as a new paradigm. This shift leads us to a new paradigm, seen in the complex world of collective identities in the increasingly important role of a new kind of community, communities which are closer to the old real, contiguity-based communities than to the great nationalistic imaginaries of Modernity. We are experiencing, in that area, another shift, one taking us from nations to networks.

Studying this latter dimension, the changes in the identity patterns of our time, we discover a new kind of socio-economic organisation: the phyle. The phyle is much more than a kind of business; it has, among its main features, all the elements that articulate our time – it is born from the experience of socialisation in virtual communities, it is transnational, and it vindicates new forms of economic democracy which, in turn, link it to traditional cooperativism.

Even more interesting: we find how organisations as distant from the hacker world as some of the largest Sufi brotherhoods in Senegal, scourged by immigration and the impact of distributed communications, plunged into a crisis and developed new, identity-based forms of commercial networks, which brought them closer and closer to phyles.

The study of phyles is not, at least today, the study of a mass phenomenon, nor is it leaping onto the bandwagon of an uncertain prophecy of social reform. It is the discovery, through the experience of a budding world, of the limitations of economic democracy and its forms. It is not at all a question of discarding the traditions and values of cooperativism. For a century and half, cooperativism has been living proof that, even under industrialism, it is possible to organise production differently, making people its centre. But the distributed network society can go even farther. Among other things, because the incentives it is based on in order to innovate and generate cohesion are different from those in industrial society.

In this book, we will discover how, paradoxically, the first phyle replicates forms whose origins lie in the first trade revolution, which took place in the Mediterranean between the 10th and 12th centuries, during the apogee of the Sea Republics and the great trade networks that linked the Muslim and Christian worlds. We will discover how much the new forms of democratic business organisation, which distinguish between community and demos, owe to medieval guilds. And above all we will see how the concepts of equality and fraternity are redefined and permeate the production and trade space creating a new kind of collective identity which takes personal freedom as its basic structural criterion.

The new world, which we are all exploring every day, sends us many signs of social and economic decomposition. This is not exactly an idyllic world. However, it still is an open world where the only path that is closed is turning back. The study of phyles is a bet on all that is cohesive and democratic in the new world of networks: a bet because the models on which we shall build our future will not be overly contradictory of those which still have a libertarian optimism about progress."

Abundance Logic vs Scarcity Logic

David de Ugarte:

"Abundance logic is a seminal concept introduced by Juan Urrutia in 2002 as the basis on which to understand what was then known as the "new economy".

The classic example is the comparison between newspapers and the blogosphere. In a newspaper, with a limited paper surface, publishing one more line in an article entails suppressing a line somewhere else as in a zero-sum game. By contrast, in the blogosphere, a space where the social cost of an extra post is zero, any blogger's publishing his or her information does not decrease anyone else's publication possibilities. The marginal cost is zero. The need to collectively decide what is published and what is not simply disappears. As opposed to scarcity logic, which generates the need for democratic decision, abundant logic opens the door to pluriarchy.

In such a universe, every collective or hierarchical decision on what to publish or not can only be conceived as an artificial generation of scarcity, a decrease in diversity, and an impoverishment for all.

For a generation and a professional domain whose work tools work under such a logic, even economic democracy must be seen as a lesser evil, a truce with reality in those social spaces – such as business – where scarcity still prevails. In that way, innovators in the domain of social networks or Internet design rediscover traditions as old as cooperatives from a new perspective." ( )

Knowledge is always communal

David de Ugarte:

"Interpretative, meaning-generating frameworks are in turn worlds resulting from a sustained interaction within a community which self-identified by means of its own knowledge system. For, in fact, knowledge exists only in community, to the extent that it is often the community which adjectivises knowledge: scientific community, scientific knowledge; faith community, theological knowledge, etc.

What goes for a kind of supposedly universal knowledge also goes for identitarian knowledge: from art to the particular knowledge of the imaginary communities of nation, ideology, or sex, through the meaninggenerating narratives of real communities, enterprises and families.

What the Internet has done is multiply the visibility and facilitate the generation of new knowledge spaces, identities, and communities, making it increasingly hard to homogeneously represent the map of social knowledge. Where there used to be a four-piece puzzle, we now have a jigsaw made up of millions of tiny pieces, the sea of flowers. Diversity makes us complex by making us face the mirror of the very diversity of our environments.

So-called netocrats are really context gardeners, information processors, communicators, hackers, bricoleurs who develop, transmit, or give value to contexts: who overlap them or break them in the organic dance of the great social digestion of information.

They have been professionally born and raised in a world in which the irreducible nature of diversity is obvious, where everything is both collaborative and identitarian, but where value is after all given by the coherence of the community they are members of and the recognition they obtain from it."

In Phyles, Community precedes Enterprise

David de Ugarte:

"Recognition and hierarchy do not go well together.

Forced cohesion tends to dissolve in a world where nothing is easier than jumping from one network to another own, than identifying with and plunging within an alternative context. Netocrat companies tend towards horizontality and the almost complete lack of hierarchies, as these are counterproductive when it comes to attaining the kind of incentives which motivate netocrats. For this reasons, Juan Urrutia proposes differentiating them from entrepreneurs and seeing them as we see scientists. They intend to make a living, but that is not their final goal.

What they really want is recognition and the possibility of continued learning.

In the midterm, netocrats feel more comfortable with the idea of living in an economically autonomous business community than creating communities around companies whose deep structure will still follow the industrial and hierarchical logic of the old world.

Those business-empowered communities are what are known as phyles. To begin with, all that is common to them all is the idea of the pre-eminence of communities." (

On the link between Fraternity and Innovation

David de Ugarte:

"In a world where the largest portion of any product’s value arises from innovation, and therefore from the creative part of the production process, valuegenerating incentives are not those aimed at managers, but those which nurture community interaction and recognition.

This friction has now moved to the world of traditional business, as every restructuring of the incentive system ends up modifying the property structure. A business must be valuable to those who work, live, and trade with it. And its value derives, above all, not so much from bonuses and incentives as from a way of life.

Netocrats, Neo-Venetians, regard business management as one more duty of their community citizenship. Just as time is no longer split between work time (divine punishment) and life time (leisure), community and management are no longer mutually alienated, but rather are fused in a space that can only be described as fraternity.

The misunderstood Pope John Paul II once said that, while the 19th century had been the century of liberty and the 20th century had been that of equality, the 21st century would be the century of fraternity. Juan Urrutia, in The Coming Capitalism, analysed the reasons for this. Fraternity, which provides the foundation, beyond liberty and equality, for economic democracy, is based precisely on what business organisations need to survive in a global market which is undergoing a crisis and is, moreover, doomed to change: an identity which makes it possible to attain assignations otherwise unattainable in its absence and a taste for work in common which makes the existence of a balance easier.

As we shall see, it is no longer a matter of moral admonition, but something which companies themselves are increasingly willing to pay for. Teaching, preparing, and organising economic democracy as a path and as an experience is already a successful product." (

Phyles are Transnational by nature

David de Ugarte:

"One of the most important characteristics of phyles is their transnational nature. Phyles don't think, or are thought, from the nation or from the state.

The We in a phyle has no national adjectives. The cohesion born within the fraternity of a community and, even further within it, from the equality of the demos ignores the dividing lines between imaginary national communities.

If there is something a full member of a phyle is very clear about, it isthe phyle demos and its origins, which lie not in any nation but in the free interaction among a group of specific people, in a real community, in a material process of knowledge generation. A knowledge that is closer, more tangible, practical and identificatory than any national imaginary which might want to absorb it.

Whereas nations are what we invented to understand the material origin of our lives in the intangible and distant world of the emergence of national markets and early capitalism, phyles explain it all over again in the specific terms of the real community, of the people we know by their names and surnames and whom we come into contact with, even if only virtually. Whereas nations turned us into the product of a national spirit, the democracy of phyles makes us the main characters in a History that is no longer a parody of classical theogonies (deified nations, heroic leaders), but a little Bible for domestic use, the tale of the origins of a tribe that decided to be its own tutelary deity. From the constructs which are the product of nations we move on to a world of phyle creators and protagonists.

Whereas nations represented the world as a jigsaw made up of many flat pieces, each one in its own colour, phyles narrate it as a series of alliances, routes and journeys through time which leave a sediment of consensual, open knowledge.

Phyle business and strategy are not thought of in national terms. To do so would be to align ourselves with the point of view of the taxman, whose final accountability lies with the accounts of a territorial state. A phyle represents itself as a single common metabolism in a world in which the flow of information and knowledge makes it possible to locate the centre whenever it is most efficient in minimal time. It is not a question of exporting to and fro, it is about materialising production itself at different times and places, in each of the passagia the Neo-Venetian year. It is not a matter of consolidating the accounts of an internationalised activity. It is about quartering, for tax purposes, the operation of a single economic metabolism into accounts which are taxable by each state.

From this point of view, a phyle is transnational even if its trade does not go beyond the frontier of a single state at one point, and even if at that point all members of its demos have the same passport. The national limit is, in any case, just a mere conjuncture. There are no implicit genealogies, there is no historical We prior to the specific will of one's own adhesion and integration. There is no intermediate imaginary between the hyperproductive tribe – living in the pluriarchic fraternity of permanent deliberation – and the generic empathy towards the human."

More Information

  1. The concept of Phyles
  2. Book series referred to:
    • El poder de las redes (2007), by David de Ugarte;
    • La sociedad de control (2008), by José F. Alcántara;
    • El capitalismo que viene (2008), by Juan Urrutia;
    • Guerras posmodernas (2009), by Jesús Pérez; and
    • De las naciones a las redes (2009),
all of them published within the public domain by Ediciones el Cobre in the Colección Planta 29 series.